How Does A Break Clause Work? Break Clause Tenancy Considerations

Not sure how the break clause works? Whether you’re a landlord or a tenant, I’ll explain all you need to know about using a break clause.

No matter how the UK economy performs, the rental market is always likely to thrive. There are approximately 23.5 million households in the UK and over a third – 35.7% – are rented out, according to Statista, with many of them in London!

A break clause will feature in a good proportion of renters’ tenancy contracts. In this guide, I’ll run through what to look for – and watch out for – in a break clause.

So if you’re a landlord, you can decide whether you want to have a break clause included in the tenancy agreement or not.

And if you’re a prospective tenant, you can decide whether a break clause is something you want to ask landlords or real estate agents about, when looking for somewhere to rent!

Tenancy agreements

First things first, if you have a break clause and want to check its terms, you’ll find them in the tenancy agreement.

While Citizens Advice says that this contract can be written or verbal, I’d always recommend having one in writing, regardless of whether you’re a landlord or a tenant.

• A written tenancy contains a long list of ‘express terms’ which include things like tenancy start date, duration, rent – and the break clause, if there is one.
• The law also stipulates that there are several ‘implied terms’ in a tenancy agreement. There doesn’t have to be a specific agreement on these matters between the landlord and tenant because they’re given by law.

For example, tenants must not cause deliberate damage and landlords must have basic repairs carried out when necessary – these are implied terms.

Seasoned professionals with years of real estate experience should provide comprehensive tenancy agreements every time, for the benefit of both parties.

Break clause meaning

So, what is a break clause and how does it work? It permits either the tenant or landlord to end the contract earlier than originally stipulated in the default fixed term.

To do so, the individual must give a pre-agreed period of notice that they intend to activate the break clause.

The tenancy agreement should define the earliest date when the landlord or tenant can exit the contract.

It should also specify how much notice they’re required to give and whether this needs to be in writing or not.

That’s what a break clause means – let’s take a look at how it works in practice.

The 6 month break clause

One of the most common break clause lengths is six months. So what does that mean in terms of the tenancy agreement?

Let’s say that a tenant has found a property they like, made an offer, had it accepted, gone through all the essential checks and signed the contract. 

They and the landlord have agreed to a one year tenancy agreement. The tenant then writes their moving house checklist, packs up their things and moves into their new home on the first day of their tenancy.

This one year contract gives the tenant permission to live in the landlord’s property for 12 months from the agreed start date. Before the year is over, both parties may agree to extend the tenancy by another year, and so on.

So, what if there’s a six month break clause in the contract? That means that either the tenant or the landlord can cut short the tenancy duration, so that it ends after as early as six months instead of 12.

Notice periods

There should always be a notice period to activate the break clause. Let’s say in this case that there’s a two month notice period.

In this scenario, if the tenant wants to leave the contract after six months, they would need to advise the landlord at least two months in advance.

So in other words, to leave at the end of the sixth month, they would need to confirm at the end of the fourth month.

This works in reverse too, in that the landlord can activate the break clause too and give the tenant the agreed amount of notice.

Break clauses: Pros

A break clause is a good option for a landlord to have included in the contract because:

• If your personal circumstances change at short notice, you have the flexibility to shorten the length of the contract. For example, if you now want or need to live in the property you had let out, you can use the break clause to bring your tenant’s stay to an end.
• If you receive an attractive offer to sell from a buyer looking to take the property off your hands, but they’re not prepared to wait until your tenant’s stay has reached its natural conclusion, you could use the break clause to curtail it.
• If your relationship with the tenant has deteriorated – perhaps because they’re not looking after the property as well as expected – you can protect your investment by asking them to leave early.

For similar reasons, many tenants want to see a break clause in the contracts they sign, because:

• If your circumstances change e.g. you get a new job in a different city and need to move there, the break clause means you’re not tied into the original contract length.
• If living in the property hasn’t matched your expectations after a few months, a break clause gives you the flexibility to end the agreement early and find somewhere else to rent instead.

Break clauses: Cons

The disadvantages of a break clause have a common theme – the unexpected change of circumstance at relatively short notice.

For landlords, a tenant activating a break clause means there’s less time than expected to find a new one.

This risks leaving the property empty, not earning rental income. However, trusting the right real estate expert to market your property greatly improves your chances of finding a new tenant in good time!

Similarly, for tenants, having a break clause in a tenancy agreement means there is more chance of their stay ending earlier than expected.

But at least in London, there are plenty of properties coming onto the market on a regular basis, as other tenants come and go.

Break clause terms and conditions – watch out

Notice period lengths can vary, so make sure you know exactly how far in advance you need to state your intentions.

For any landlords looking to use Section 21 for the purposes of reclaiming their property, the minimum amount of notice required is two months.

However, there are several restrictions around these notices. Basic prerequisites include having given the tenant a copy of the Energy Performance Certificate (EPC) rating, for example.

There are preconditions on the tenant’s side too. These can include the requirement that they have paid all the rent due before giving notice.

In some cases, there may be a break clause fee in the contract, so tenants should also look out for this and budget for it accordingly.

Final thoughts: How does a break clause work?

I hope this article has answered your questions around break clauses. There are plenty of other useful articles for both landlords and tenants on our blog too.

There’s plenty to think about if you want to have one – for example, how long or short do you need it to be?

It’s uncommon to find a break clause that comes into effect after less than six months into a tenancy.

And of course, every break clause should also have a notice period linked to it, with a set of preconditions on both sides.

If you’re a tenant or landlord with any follow-up queries about break clauses, or you’d like to ask about something in our portfolio, we are here for you! Please don’t hesitate to get in touch.

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